On the brink of collapse, Enron asked Treasury to 'call the banks'

Published: Saturday, January 12, 2002

Associated Press

WASHINGTON (AP)  Enron sought the Bush administration's intervention with banks in an effort late last year to stop the company's spiral into bankruptcy, the Treasury Department disclosed Friday as the White House worked to control political fallout from a widening investigation.

"This dog won't hunt. That's a reference to the politics of it," said presidential spokesman Ari Fleischer amid the latest information on the collapse of the Houston-based energy conglomerate.

Enron President Lawrence "Greg" Whalley telephoned Treasury's undersecretary for domestic finance, Peter Fisher, "six to eight times" in late October and early November, said department spokeswoman Michele Davis.

It was the first indication that the energy trading firm, which has ties to many top Bush administration officials, had asked for government intervention as it faced collapse.

"As Enron's negotiations with its bankers for an extension of credit neared a decision point, the president of Enron asked Undersecretary Fisher to call the banks," Davis said.

Fisher "inferred he was being asked to encourage the banks to extend credit. He made no such calls," she said.

The announcement followed disclosures that Enron Chairman Kenneth Lay, one of Bush's biggest political contributors, had called Treasury Secretary Paul O'Neill, Commerce Secretary Don Evans and Federal Reserve Chairman Alan Greenspan in the days leading up to the biggest bankruptcy filing in U.S. history last fall.

Administration officials have denied that any government aid was ever extended to the beleaguered company.

Democrats, seeing the disclosures as an opportunity to chip away at Bush's high approval ratings, are emphasizing the close ties between Enron and administration officials and the impact of the failure on Enron employees.

Thousands of workers were laid off and many saw their retirement nest eggs vanish when Enron stock plunged in advance of the Dec. 2 bankruptcy filing of the nation's seventh largest company.

White House officials worked Friday to try to limit the damage, and to put distance between the president and the Enron chief.

"This needs to be fully investigated to determine if there was any criminal wrongdoing by Enron," said Bush press secretary Fleischer. He said the president also is pressing for a review of rules governing 401(k) retirement plans like those at Enron.

"If anybody else wants to focus on politics, that's their prerogative. But the president's focus is on getting to the bottom of this fully," Fleischer said aboard Air Force One on a presidential trip to Pennsylvania.

Meanwhile, senior Bush adviser Karl Rove offered his view of the relationship between Bush and Lay. "The president knows him. He is a friend. But the idea that he is a friend in the sense that this is a guy who's a close intimate is just ludicrous," Rove said in an interview with The Associated Press.

When Bush was the governor of Texas, Lay was chairman of the governor's business council. "They had quarterly meetings and he'd come in and talk to the then-governor about what it was they hoped to achieve at the meeting and they'd go over the agenda," Rove said.

Bush has described Lay as "a supporter." He said he saw Lay twice last year, but that they did not discuss Enron's finances.

In a joint statement, O'Neill, Evans and Labor Secretary Elaine Chao said they were following up on Bush's directive to review retirement program rules. They said they were directing staff to begin analyzing the effectiveness of measures meant to protect retirement savings.

Separately, O'Neill said that Lay's call to him in October was to "give me a heads up" rather than to ask for specific government help.

"It's the kind of thing I would expect any big company executive to do if they understood how the government works and that the Treasury Department has some responsibility to make sure the world capital markets are not unsettled by events that are going on in the private sector," O'Neill told ABC's "Good Morning America."

"I thought it was business as usual," O'Neill added.

Meanwhile, investigators for the Senate Governmental Affairs permanent subcommittee on investigations modified its subpoena to the accounting firm that audited Enron's books, Arthur Andersen LLP, to include all documents related to the destruction of Enron records.

The auditing firm said Thursday that its employees had destroyed a "significant but undetermined" number of Enron financial documents.

The Senate panel, conducting one of four congressional inquiries, has authorized 51 subpoenas.

The collapse is also being investigated by the Justice and Labor departments and the Securities and Exchange Commission.

Meanwhile, an Army spokesman said Friday that Army Secretary Thomas White  who was Enron's vice chairman before his Pentagon appointment  has not talked with company officials since he took office last May 31. "That's a part of his past now," said the spokesman, Col. Jim Allen. "He's had no contact with Enron in a business sense."

White's financial disclosure reports, written last year before the worst of Enron's stock crash, valued his company stock and options at between $50 million and $100 million. White has sold all of his Enron stock to comply with federal ethics rules.